Clinton Aided Indonesia Regime

Over the last four years, the Clinton administration has taken specific steps to provide trade and political benefits to Indonesian President Suharto and his government, in some cases rejecting recommendations or stopping investigations pursued by lower-level U.S. officials.

In one instance, the White House interceded after James Riady, scion of a wealthy Indonesian family, came to Washington to arrange meetings between a senior aide to Suharto and top-level officials in the administration. Riady, his family and their companies and executives have contributed $475,000 to the Democratic Party and its candidates since 1991.

Riady was also present at meetings on at least two occasions with U.S. officials at which Indonesia’s trade benefits were discussed, administration officials acknowledged.

Clinton administration officials have repeatedly asserted that the contributions by the Riady family are legal and proper and that they have not influenced U.S. government policy. “There was no connection between James Riady and U.S. trade policy in Indonesia,” Secretary of Commerce Mickey Kantor, until recently the U.S. trade representative, told The Times on Tuesday. “Absolutely none.”

But the Clinton administration’s steps for Suharto and Indonesia provide a window into the controversy that now swirls around Clinton’s and Democratic Party fund-raising among Indonesian interests. In addition to the Riadys’ donations, another $425,000 in contributions by one Indonesian immigrant couple to the Democratic National Committee has provoked questions about whether Indonesian money is unduly affecting U.S. policies and actions.

In Albuquerque, where he has been preparing for tonight’s presidential debate, Clinton told reporters he expected he would be asked about the Indonesian contributions during the televised session.

“I expect to have the opportunity to discuss” the issue, he said, “but I believe that the political parties should not give back contributions that were legally made and legally received. And if they made a mistake and took money that shouldn’t be taken, they ought to give that money back.”

The available evidence is not conclusive on whether undue Indonesian influence exists. But the evidence does suggest that the Indonesian government was the third partner in a complex relationship that evolved between the Clinton administration and the wealthy Riady family.

The Riadys, owners of the Indonesia-based Lippo Group and one-time owners of a bank in Little Rock, Ark., provided money to Clinton and the Democratic Party. The Clinton administration was in a position to help Suharto’s Indonesian government. And Suharto, who with his family dominates the Indonesian economy, was in a position to help the Riadys and the Lippo Bank.

One of Clinton’s senior advisors, Bruce Lindsey, said he has been present for two meetings between Riady and Clinton in the past two years, including one in the last few months.

“It was basically a drop-by social visit,” Lindsey said of that session. He said no issues of U.S. policy were discussed. When asked whether the meeting was about fund-raising, he declined further comment. “I’m not going to tell you what the meeting was about,” he said.

U.S. Actions

The Clinton administration help for Indonesia has included the following:

* TRADE: U.S. government officials were conducting a formal investigation of whether to cut off Indonesia’s trade privileges because of the country’s labor policies. But on Feb. 16, 1994, before the U.S government review had ended, U.S. Trade Representative Kantor suddenly announced that the administration was suspending the process and was allowing Indonesia to keep its trade privileges, worth over $600 million in sales to Indonesian companies.

* DIPLOMACY: In the spring of 1993, Suharto was seeking the right to meet with Clinton at a summit of world leaders in Tokyo--an idea opposed by many U.S. foreign policy officials. A top-level Indonesian official was dispatched to Washington to pursue the request and Riady helped to arrange his meetings. In May 1993, Clinton surprised his advisors by abruptly announcing in public that he would meet with Suharto.

When Clinton took office, he had ties dating back well over a decade to the Riady family. The Riadys were at the center of a network of wealthy businessmen in Arkansas and Indonesia who worked with one another.

In 1977, Mochtar Riady, the senior member of the family, began exploring the possibility of buying a bank in the United States and wound up in contact with a major Southern business leader, Jackson T. Stephens, who encouraged him to invest in Little Rock.

Together, the Riadys and the Stephens family bought the Worthen Bank, Arkansas’ leading financial institution. James Riady moved to Little Rock and became the president of the bank.

The Riadys sold their interest in the Worthen Bank in the 1980s. But they kept up their ties with Arkansas leaders and with the Clintons after they came to the White House.

Suharto’s Goal

In March 1993, two months after the new administration took office, First Lady Hillary Rodham Clinton flew to a Little Rock banquet to receive a March of Dimes award as Arkansas Citizen of the Year. Mochtar Riady flew in from Indonesia for the affair and gave the charity $50,000 in the Clintons’ honor.

In 1993, a top priority of Suharto was to get a face-to-face meeting with Clinton and other world leaders.

That year, the G-7 summit meeting of the world’s leading industrialized nations was to take place in Tokyo. Suharto was arguing that he should be permitted to attend the summit as a representative of the countries that make up the Non-Aligned Movement.

In May 1993, the Indonesian president dispatched an Indonesian political leader, Research and Technology Minister B.J. Habibie, to Washington to persuade the Clinton administration to grant the meeting with Suharto. James Riady came to Washington to help Habibie and arrange meetings for him, U.S. officials said.

On May 6, 1993, with Habibie in attendance, Clinton appeared at a meeting of the Export-Import Bank. In the midst of a speech about global trade he suddenly began to talk about Indonesia.

“I know we have someone here from Indonesia,” the new president declared, referring to the Indonesian minister. “ . . . We have enormous opportunities there.”

In Tokyo, “I’m going to meet with the president of Indonesia to send a signal to the . . . emerging nations of the world that the United States wants to be their partner in new trade relations.”

Clinton’s remarks took by surprise the foreign-policy staff members who had drafted Clinton’s speech. “We never figured out how that [the promise to meet Suharto] got in there,” said one of these officials, who declined to be identified.

Indonesia Trade

When Clinton finally met with Suharto in Tokyo, one of the main issues Suharto raised was his irritation with American efforts to curb his country’s trade privileges, according to U.S. officials.

In 1992, the United States had launched an intensive, yearlong, formal review of whether Indonesia should lose trade benefits known as the generalized system of preferences (GSP).

Under the GSP program, developing countries are permitted to export some goods to the United States without paying any duties. But the U.S. law includes a provision that the privileges can be cut off if a nation’s treatment of its workers fails to live up to “international labor standards.”

On June 25, 1993, Kantor, then U.S. trade representative, finished the review, which included several other countries besides Indonesia. He did not move to cut off Indonesia’s GSP privileges. But Kantor did take a relatively tough action, announcing that the the administration was going to continue its review of Indonesia, rather than ending the investigation.

U.S. labor officials considered Indonesia an especially egregious case because it paid workers extremely low wages, discouraged the development of independent unions and sometimes relied on the help of the military to keep labor in line.

At the time, Indonesia’s duty-free exports to the United States were valued at $643 million, according to the U.S. trade representative’s office. They included electronics, toys and wood products. Without the GSP benefits, these goods would have been subject to average duties of 5.5%.

Pharis Harvey, executive director of the International Labor Rights Fund, noted that most of Indonesia’s exports to the U.S. do not get GSP benefits and thus would have not been affected. However, Harvey said, “what the Indonesian government seemed to fear more than anything else was [that] the loss of GSP status would have a dampening effect on foreign investors.”

As a result of Kantor’s 1993 action, an interagency team of U.S. officials launched a more intensive review of Indonesian labor practices. They conducted meetings, both in Washington and in Indonesia. James Riady was present on at least two occasions, along with representatives of multinational companies and U.S. business representatives in Indonesia who were worried about the impact of the labor review on their firms’ operations.

Joe Dimond, a U.S. trade official working on the case, recalled in an interview specifically meeting with Riady and Lippo officials.

“The U.S. Embassy [in Jakarta] is selecting for us people who they think are influential and important,” Dimond said. “ . . . [Riady] is a very prominent person. If he comes to one of these meetings, you’re going to spend a certain amount of time with him. . . . He does have access to ministers and the [Indonesian] President’s chief of staff.” Dimond said he could not recall Riady advocating a specific position on labor issues.

Kantor’s Actions

On Feb. 16, 1994, Kantor reversed course and the review of Indonesian labor policies was suddenly ended. While saying that “more needs to be done,” Kantor announced that Indonesia had recently made enough progress to be relieved of the threat of losing its trade benefits.

“The Indonesian government had announced new regulations to limit the role of the military in labor matters and to allow the formation of independent labor unions in the factories,” Dimond explained.

Kantor’s action stunned labor and human rights officials, who argued that, at the least, the administration should have kept the investigation open to see whether the new labor rules announced were put into effect and actually helped Indonesian workers.

Kantor said he never met with Riady about the labor case. “I have never spoken to James Riady or anyone else in his family about our trade policy toward Indonesia at any time under any circumstances.”